PMA files to exchange 4.25% convertibles for new securities with later put date

New York, Oct. 1 - PMA Capital Corp. filed a registration statement with the Securities and Exchange Commission to exchange its existing 4.25% senior convertible debentures due Sept. 30, 2022 for new senior secured convertible debentures.

The Philadelphia-based property and casualty insurer said the exchange is intended to refinance the existing convertibles with new securities that have a later put date. In addition, PMA intends that the transaction will improve its debt ratings and the financial strength ratings of The PMA Insurance Group.

PMA is offering the new convertibles on a one-for-one basis for the existing $86.25 million of convertibles.

The new convertibles will be putable on June 30, 2009 in cash compared to the existing convertibles' puts on Sept. 30, 2006, 2008, 2010, 2012 and 2017 at par, payable in cash or stock at PMA's option. The put price on the new convertibles has not yet been fixed.

The conversion price for the new convertibles will be $16.368, the same as the existing convertibles. The maturity date will also be unchanged at Sept. 30, 2022.

The interest rate for the new convertibles has also not been fixed but all or part will be payable in kind at PMA's option.

Unlike the existing convertibles, the new securities will have an asset sale put up to June 30, 2009. As with the existing convertibles, there will be takeover protection although the precise provisions will be different.

The new convertibles will rank equally with PMA's $57.5 million 8.5% monthly income senior notes due 2018 and ahead of any of the existing convertibles that remain outstanding. The security includes a first lien on 20% of the outstanding capital stock of each of PMA's principal operating subsidiaries.

The exchange will also make the convertibles immediately callable at prices to be fixed. The call option will expire at June 30, 2009. The current convertibles are callable from Sept. 30, 2006 at par.

The contingent conversion and contingent interest provisions will be eliminated in the new securities.

PMA filed the exchange in an S-4 registration statement with the Securities and Exchange Commission. However the registration has not yet become effective. As a result, no timing was included in the filing.

There is no minimum condition to the exchange.

Banc of America Securities LLC will be dealer manager for the exchange (contact High Yield Special Products at 888 292-0070 or call collect 704 388-4813 or Equity-Linked Liability Management at 888 583-8900 x2200 or call collect 212 933-2200). Global Bondholder Services Corp. is the exchange agent and the information agent (banks and brokers call collect 212 430-3774; others call 866 873-7700).

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